"Any discussion of a region’s economy would be incomplete without taking a look at its housing market. Housing not only is a major generator of jobs and demand for goods and services, but it also helps define an area’s quality of life and economic viability. The condition of the housing market itself is the most important indicator of consumer confidence, given the fact that a home is typically the largest single purchase a consumer will make."
That paragraph led off this column a year ago, and it’s no less true today or any other point in time. Nothing good happens in an economy until there are “sticks in the air,” an industry adage to describe wood framing being erected for housing and other construction.
In recent years, lagging consumer confidence has not helped those who sell new or pre-owned homes. Nowhere were consumers more nervous than in the for-sale housing market, where high unemployment and shrinking home values had jammed too much product involuntarily onto a market already plagued by weak demand.
Those days appear gone, at least for now. Today, first-time buyers are crowding into seminars on home ownership programs while droves of experienced buyers also are looking. Realtors are busy; applications for real estate sales licenses are up.
In North San Diego County, arguably the region’s most diverse housing market, the median price for detached homes rose 21 percent over the past 12 months, according to the HomeDex report on November sales data from the North San Diego County Association of Realtors. Attached-home prices jumped nearly 9 percent from a year ago. The biggest spike last month in the year-to-year median price for detached homes was a 112 percent hike in Cardiff.
The growing price increases are explained in part by a growing shortage of available product. There were 40 percent fewer homes listed for sale in North County than a year ago, including a 7 percent shrinkage in listings in just a 30-day period between October and last month.
The number of homes sold increased 16 percent between November last year and this year, despite a seasonal 14 percent drop in closed escrows between October and last month. That means it’s also taking a shorter time to sell North County homes this year. Last month, the median days-on-market for detached homes fell from 65 a year ago to 37, indicative of continuing low interest rates, fewer homes for sale and growing confidence in the notion of home ownership.
November’s $2,278 monthly payment, including principal, interest, property taxes and insurance, for the median-priced detached home in North County increased by $233 more than a year ago.
The extent to which the $484,500 median-priced North County detached home is affordable also plays a major role in the prospects for a housing recovery. Using conservative monthly income parameters and a 20 percent down payment requirement, 37 percent of households countywide could afford North County’s median-priced home in November. That’s slightly better than the 35 percent of households that could afford the $409,000 median home a year ago and substantially better than the 29 percent of county households that could afford one two years ago. Elsewhere in the region, 46 percent of households could afford a median-priced home, up 6 percent from the 40 percent in 2010.
Home sales data don’t tell the whole story though. Continuing higher-than-normal unemployment, a looming "fiscal cliff," and the certainty of higher taxes and other costs are factors that could stall a continuing recovery in North County and elsewhere. While short-term rates are forecast to be relatively stable, nobody’s all that sure about mortgage and other longer-term rates.
Such harbingers, of course, are well beyond the means of any individual city or public agency to solve. But there is a role for the region’s elected leaders. North County as a whole has to compete more keenly for a bigger piece of a smaller economic pie. That includes taking steps to provide as vibrant a housing market as possible.
Questions that come to mind right away include:
Is there a region-wide approach to attract quality employers? Supervisor Bill Horn’s Prosperity on Purpose program that brought Escondido, San Marcos, Vista, Oceanside, Carlsbad, the county and area Indian reservations together around a comprehensive economic development strategy earlier this year is an important blueprint to help participating jurisdictions attract jobs and the accompanying need for more housing. It remains now for regional leaders to use the data.
Is there a diverse range of affordably priced quality housing that will preclude employees from having to commute from more affordable neighborhoods in Riverside County and elsewhere? North County is pricey; fewer than half the region’s households can afford to buy a home there. To compete with regions elsewhere will require more affordably priced housing.
We will need to find answers to these questions in the coming year.
Daniels, principal consultant of Dick Daniels Public Relations, has been a public relations practitioner for 35 years and was an Escondido city councilman from 2006 to 2010.